News
A dearth of public corporate issuance and clarity around interest-rate direction provided a window of opportunity for PACCAR Financial to bring a quickfire return to the Australian market. The transaction, the issuer’s second in nine months, was two-times subscribed based on a final book in excess of A$320 million (US$222.6 million).
On 11 June, following the release of the Queensland state budget, Queensland Treasury Corporation (QTC) revealed a borrowing programme for the 2019/20 financial year of A$9.9 billion (US$6.9 billion). The requirement is a A$700 million reduction from the forward estimate in the 2018/19 forecast.
Australia’s residential mortgage-backed securities (RMBS) market underwent a May and June renaissance with A$7.6 billion (US$5.3 billion) of primary supply priced. With more deals in the pipeline, intermediaries say liquidity dynamics continue to support the influx of deals. Meanwhile, a sentiment shift on the housing market is set to provide ancillary support.
Ongoing institutional support for unrated NEXTDC has allowed the returning issuer further to bolster its capital-requirement capabilities for the future. Capacity issues are not yet a valid concern, however the issuer is making plans for when unrated supply may eventually outpace demand in the local market.
South Australian Government Financing Authority (SAFA) came to the fore in Australian alternative reference rate (ARR) innovation on 6 June, when it priced the first-ever deal linked to the Australian overnight index average (AONIA) reference rate. Deal sources say the rate is not meant to be a replacement for bank bill swap rate (BBSW), but a part of a broader suite of products Australian issuers and investors can access better to suit their needs.
Substantial growth in Australian investor participation in sovereign, supranational and agency (SSA) Kangaroo issuance is in large part attributable to the continued evolution of sustainability-linked issuance, market participants say. This could have further positive consequences in primary and secondary markets as SSAs build sustainability bond curves.
The Reserve Bank of Australia (RBA)’s decision to cut the cash rate on 4 June surprised no-one. Analysts are focusing on a perceived lack of dovish intent in the RBA statement, while an economic forum conducted immediately prior to the cut identified the local housing market – rather than global trade uncertainty – as the primary likely driver of future rates direction.
Treasury Corporation of Victoria (TCV) added a new line to the long end of its curve on 3 June, with a A$267 million (US$186.4 million) November 2034 syndication led by Westpac Institutional Bank. The deal was driven by reverse-enquiry demand out of Asia.
Svenska Handelsbanken prioritised spread over volume in its Kangaroo return on 22 May, deal sources suggest, with pricing within its global curve a clear priority. The transaction is also the first financial-institution Kangaroo deal to print in 2019. Leads say this is because of favourable funding conditions globally and a range of available issuance formats.
On 30 May following the release of the New Zealand budget, New Zealand Debt Management (NZDM) revealed a NZ$10 billion (US$6.5 billion) borrowing requirement for the 2019/20 financial year. The programme is NZ$2 billion higher than forecast at the half-year economic and fiscal update (HYEFU) in December 2018.
The Australian Office of Financial Management (AOFM) issued a new line by tender on 29 May. A lower net-new-issuance requirement has allowed the sovereign borrower to weight its issuance strategy towards tenders this financial year, only using syndication to debut a new 2041 nominal bond and a 2050 inflation-indexed bond.
Bank of Queensland (BOQ) says its conditional pass-through (CPT) covered-bond platform offers an important point of funding differentiation following its second-ever euro deal in this format. At a time when a cluster of BOQ’s peers are pursuing residential mortgage-backed securities (RMBS) issuance, BOQ says CPT covered bonds offered an attractive cost of funds and further investor diversification.